Dallas-based financial holding company Hilltop Holdings Inc. submitted to SWS Group Inc. a written proposal to acquire the outstanding shares of SWS that Hilltop does not already own for $7 per share in 50 percent cash and 50 percent Hilltop common stock.
The deal would value SWS Group at about $231 million. SWS confirmed Jan. 13 it had received the unsolicited proposal. In 2011, Hilltop invested $50 million in SWS in the form of a senior unsecured loan. In conjunction with Hilltop’s investment in SWS, SWS issued Hilltop a warrant to purchase 8,695,652 common shares of SWS at an exercise price of $5.75 per share. Hilltop currently owns 24 percent of SWS common stock, inclusive of the warrant. In a letter Hilltop sent Jan. 10 to the SWS board of directors, the company said, “We believe that our proposal offers compelling value for SWS stockholders, as it provides a premium market, immediate and certain value with the cash consideration and the opportunity to participate in the success of the combined company though out stock.” Hilltop acquired PlainsCapital Corp. in November 2012 and First National Bank of Edinburg in September 2013.
Hilltop currently has more than $9 billion in assets, $1.2 billion of equity, about 4,750 employees and significant excess capital. The company’s common stock is listed on the New York Stock Exchange under the symbol HTH. SWS said its board of directors will review the proposal to determine the course of action that it believes is in the best interests of the company and its stockholders. No date has been given on when the board will make its recommendation to stockholders. SWS Group stockholders are advised to take no action at this time.
The proposal is subject to the approval of the SWS board and subsequent approval by SWS stockholders. The transaction would be subject to customary and usual closing conditions, including obtaining required approvals from regulators. The proposed transaction also will require the consent of Oak Hill Capital Partners pursuant to existing debt and related agreements with SWS. SWS Group, also headquartered in Dallas, is traded on the New York Stock Exchange under the symbol SWS. SWS Group Inc. subsidiaries include Southwest Securities Inc., SWS Financial Services Inc. and Southwest Securities, FSB. Stephens Inc. is serving as financial adviser to Hilltop and Wachtell, Lipton, Rosen & Katz is serving as legal counsel to Hilltop.